Management accounting techniques -- accounting procedures that emphasize current information and analysis for managerial decision-making -- can provide small-business owners with useful information for making business decisions. However, this information isn't without fault or cost. Making sure you understand some of the problems related to managerial accounting information can help you ensure that you only implement managerial accounting systems that will provide a net positive benefit to your small business.

GAAP Compliance

One of the biggest complaints about management accounting techniques is that many of these techniques are not compliant with generally accepted accounting principles, or GAAP. For example, activity-based costing can provide more accurate costing information to decision-makers through an alternative way of assigning costs to products. However, because the method doesn't assign all manufacturing costs to products, it is not in accordance with GAAP. Therefore, if you wish to use activity-based costing, then it will be in addition to using a GAAP-compliant method. For small-business owners, this can become costly. Before implementing management accounting techniques, you should ensure that the benefits of the technique are expected to outweigh the cost of multiple systems. If this is not the case, then it probably isn't worth the time and money.

Adaptability

While some guidelines exist for management accounting procedures, the techniques are able to be adapted to the specifics of your business. This can be an advantage of management accounting, but is also a drawback. Because management accounting is so flexible, it can be difficult to compare results across companies, especially if you are inconsistent in applying management accounting techniques in-house. For example, there are only guidelines for preparing many management accounting reports, with the idea that the report should be tailored to your business specifics. However, what one manager finds important may be different than what another manager finds important. As such, the adaptability of these tools can make comparison difficult. You should make sure that if you are interested in benchmarking, or comparing your performance to other companies or industry metrics, that you start on a level playing field. If the methods used to produce the comparisons are not the same, then faulty conclusions are likely.

Reliability

Management accounting techniques usually emphasize the timeliness of information to allow business owners to make decisions. This implies a trade-off with reliability. For example, say you are trying to determine next year's sales. To get the most accurate figure, you just need to wait until next year occurs, and you will know the result with near-absolute certainty. However, if you need this information for a decision that you are planning on making in the present, then timeliness of information is more important. Before relying on management accounting information, you should evaluate how important the accuracy of the information is. If accuracy is the most important quality of the information, then more investigation should be done to determine how the estimate was made.

Cost

Management accounting information can be costly. In many cases, management accounting techniques require time and money to design, implement, monitor and evaluate. This can involve moving current employees away from their normal job duties, hiring additional employees or hiring external consultants. As such, you should consider all of the costs that are required from design to retirement of the proposed system. You may also want to consider preparing a sensitivity analysis when evaluating this decision. The technique prepares different cost estimates based on uncertainty in prediction. For example, if considering adopting an activity-based costing system, you may want to see what your cost savings would be from the additional information if the implementation cost was 1, 5 or 10 percent more or less. This can help you see if unexpected expenses would derail the benefits of your project.

About the Author

John Freedman's articles specialize in management and financial responsibility. He is a certified public accountant, graduated summa cum laude with a Bachelor of Arts in business administration and has been writing since 1998. His career includes public company auditing and work with the campus recruiting team for his alma mater.